The Lambertville record. [volume] (Lambertville, N.J.) 1872-1968, 1887-03-30
SOME FALLACIEs IN REGARD TO THE
VALUE OF MONEY, RATE OF INTER-
EST, LABOR, LAND AND OTHER
GAPITAI..
oBEaT K. no,
No. H.
RATE OF INTEREST.


which some fallaciously term the value Of
money! The two are certainly not identi-
cal for they generally move in opposite d.
rections, the rate Of interest going up as
the exchange or real value Of money is
coming down, aud rice vsrsa. It is true
ekAt the first or temporary effect Of great
add sudden increase of money, offered
through loans, may be to beat down the
rats u interest; but IS the monnv enters
in exchange for products or
prices almost Immediately rise.
Risiag prices cause higher profits, which,
in turn. encourage business men and pro-
ducers to bid higher rates for loans. =
These bankers are tempted to supply,
thus causing greater imitation Of prices
aud more intense demand for loana until
the credit currency is stretched to its ut
most, when there comes collapse or
panic in credits and prices. On the other
hand, when prices are descending, be-
cause of collapse Of credits or drain of
gold, the order is reversed. Lower prices
cause lower profits, These, 10 turn, lesson
the demand for loans, and still further
contract the credit currency, causing yet
lower prices and profits, and necessarily
lower rates Of interest unit, the depths of
stagnation Is reached. Thus we behold
the greatest abundance and lowest rate
not, as We shall presently see, of money,
bat OF capital seeking interest in our
money centres, conjoined with the great
est scarcity anj highest value Of money
in exchange for prodacts. /. is this
wrong action Of money issued 10 the form
Of loans---being inflated most largely
when prices are high. and rising rapidly,
and contracted most severely when prices
are low and descending-that makes bank
issues an almost intolerable evil 10 the
people--second only to that Of no paper
currency. The same wrong action in
heres in every attempt to regulate the
value Of money by the rate of interest,
whether by government or otherwise
only In the case of low rate government
loan, the abnormal or speculative de-
mand for loans caused by rising prices
being continually supplied, the imitation
could be much greater. Money should be
issued only for the purposes of money,
Wig In exchange for labor aud its pro-
duets, so that its effect on prices. alone,
may be the sure criterion Of under or over
issue.
What then is the rate of interest Let
us look At facts as they really occur. Per-
sons untitled for, or not desiring an ac-
tive business life may, through inheri-
lance or former exertions, be the posses
sors or part possessors of business pro-
perty. The choice Of three plans is open
to them: /. They may hire superinsend-
cut for their business; 2. They may rent
their property and be clearer of business
care, or 8, They may exchange their pro.
perty claim for money claim on the
receiving interest in lieu OF
rent. It Is evident by these examples Of
the origin of most money claims that the
rate of interest is based upon the net re-
turns OF ownership and guaged by them;
II much less than this, property claims
would not be exchanged for money claims,
but the reverse. But closer extmina-
tion may make 1t still palmer. Here at
the East the annual returnsfr from farm bust
meas (deducting Of course purchased feed
and manure) Is seldom more than from IL
to 10 per cent. of the value of the proper
" engaged. Allowing one-half for the
labor, as is usual here 10 routing, and /
per cent. for taxes and repairs aud we
have the net returns of ownership OF pro-
perty equal to from 5 to 7 per cent. Of its
value, which corresponds with the general
rate of interest at the East on farm So
curity. At the West the annual returns
from farm business frequent y amount TO
from 80 to so per cent Of the value of the
property engaged. But labor costs more,
say two-thirds Of the returns. Hence, al
lowing for taxes and repairs, the net re-.
turns of farm business at the West Is
probably from s to 10 per cent. Of the
capital engaged, which corresponds with
the rate of interest at the West on farm
sednrity. Iu England, land is higher al
though labor Is lower, the net returns on
the capital engaged are probably not
more than from to per cent, CORES
ponding with the rate of interest IN that
country. In other business the net re.
turns are more complicated with risk and
the correspondence between profits and
interest is less plainly seen, but still
evident. Indeed, VIC might reason that
as money can gain no increase or interest
of itself, but mnst DO exchanged for
money claims on the one hand and pro-
ductive property on the other, before In
crease can come, then, so called interest
on money Is really the return of loaned
power of ownership and closely eqniva-
lent to rent. 70 England, owing to fami-
~ HTtucs taWb Vi tuhbTitduuby cCg tduQ
claims arc not freely exchanged for money
claims and we soc a nation Of renters
rather than payers of interest. In Ameri-
ca there is but little pride of land owner
ship among the wealthy and an intense
desire for 1t in many Of the wealth win
ners of the country. Hence, as nation
we pay interest rather than rent, and any
close observer can testify to the far
stronger inducements to personal exer-
tions and land improvements caused by
the latter social system.
1t follows from the above that any
scheme which seeks, by wild initiation
OF money or otherwise, TO lower greatly
and arbitrarily the rate of interest, would
IL successful, work a detriment to society
by changing the higher social status Of
conditional ownership into the inferior
and less beneficial one Of tenant at Ian
lords will. While few debtors may
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